Abu Dhabi’s Shorooq Partners unveils debt fund to invest in Mena start-ups

The new fund has already committed a majority of its capital

Abu Dhabi-based Shorooq Partners was founded by Mahmoud Adi (right) and Shane Shin. Photo: Shorooq

Abu Dhabi venture capital firm Shorooq Partners unveiled a new venture debt fund in partnership with South Korea’s IMM Investment Global.

The Nahda Fund 1 will invest in start-ups based in the Mena region, a company spokeswoman told The National on Monday.

“The fund has already committed a majority of its capital including its investment into Pure Harvest, an AgTech company revolutionising the region’s agriculture with climate-controlled smart farms,” Shorooq Partners said.

“The overwhelming amount of interest shown by founders towards the fund proves venture debt has been a long time in coming to the region.”

Venture lending in the region comes amid a rise in start-ups across the Mena region.

The total funding secured by start-ups in the Mena region rose 64 per cent to $1.2 billion in the first half of the year, according to the latest report from data platform Magnitt.

This was more than the $1.09bn raised last year as investors actively sought out technology-enabled businesses that could aid the post-coronavirus recovery.

Venture lending or venture debt complements traditional venture equity financing and provides founders with a “non-dilutive” means of financing that requires little to no equity stakes to raise funds, according to the company.

A long-standing form of venture investment in the US and Europe, venture debt has recently surged in emerging markets such as India, China and South-East Asia but has yet to be properly utilised in the Mena region, the company said.

“Once a start-up reaches a certain stage, it becomes very expensive to solely rely on equity financing for continued growth,” said Shorooq’s partner Samir Yamani.

“With a relatively stable cash flow, utilising debt for routine expenditures such as working capital leads to a more optimal capital structure.”

The fund also attracted interest from international investors, with more than half of the subscriptions coming from investors based outside the Mena region, the company said.

“This is IMM’s first foray into the Middle East and we are proud to have partnered with Shorooq to provide our investor base the chance to connect with top-tier opportunities outside of Korea” said Youngjoon Lee, chief executive of IMM Investment Global.

Apart from Pure Harvest, Shorooq’s portfolio consists of robo-advisory platform Sarwa, digital freight company TruKKer, Lean, Capiter and Retailo.

Last year, the Abu Dhabi Investment Office, which oversees foreign direct investment and private sector development in the emirate, invested $5m in the Bedaya fund operated by Shorooq Partners to help develop the start-up ecosystem in the emirate.